Method and System for Providing a Distributed Adaptive Rules Based Dynamic Pricing System

ABSTRACT

A system for providing distributed control to process transactions is disclosed, including a service provider system, a point of service device, and a portable device. The service provider system, point of service (POS) device, and portable device each have a plurality of rules and a number of meta-rules. The portable device is used with the POS device to conduct a transaction. If the portable device is unable to determine the outcome for the transaction, the portable device determines whether its rules may be altered locally to determine the outcome, or request the POS device to help determine the outcome. If the POS device is unable to determine the outcome, the POS device determines whether its rules can be altered locally in order to determine the outcome, or request the service provider system to help determine the outcome using the rules and meta-rules associated with the service provider system.

BACKGROUND OF THE INVENTION

In today's environment, promotion systems often include point of serviceor sale devices and portable devices. Such systems generally utilize aset of rules to manage and process transactions. Typically, these rulesare centrally managed and elements of the rules or the data used intheir application are distributed from a central location, such as aserver, to the points of service as needed from time to time on atransaction-by-transaction basis. As a result, the bulk of theprogramming administration is performed at the central location.Conversely, limited transaction processing is performed on the part ofthe portable devices and/or the point of service devices.

A number of situations often lead to sub-optimal use of such systems,thereby resulting in service delivery that does not meet the performanceexpectation of the service provider or user. Examples of such situationswould include cases where data would be missing or corrupted at thepoint of service, where the central system would fail to update therules and data used by the point of service device in a timely fashion,and where centrally defined rules cannot accommodate the variety ofsituations at the point and time of service, etc.

Sub-optimal use includes, for example, a promotion system where thepromotional messages used in the portable devices are out of date; arewards system where the incentive programs in the system are notdelivering consumer appeal; and a price definition system where thedynamic shifts of demand and offer at a particular outlet are notproperly integrated in a timely manner.

In addition, conventional systems also limit interactions betweenservice providers that would allow them to jointly optimize the deliveryof their services, for instance, where the use of certain forms ofpayment and promotion for certain products and services are tiedtogether.

Hence, it would be desirable to provide a system that is capable ofhandling and processing transactions more efficiently in a distributedmanner.

BRIEF SUMMARY OF THE INVENTION

In one exemplary embodiment, a system for providing distributed controlto process transactions is provided. The system includes a number ofnodes, each node having a node order and having associated therewith anumber of rules and a number of meta-rules. The rules use a variety ofdata as inputs including transaction and event related data, devicerelated data and environment related data. The rules also include one ormore rules on communications routing between nodes.

A first node uses its associated rules to determine an outcome for atransaction. If the first node is unable to determine the outcome forthe transaction using its associated rules, the first node uses itsassociated meta-rules to either determine whether one or more of itsassociated rules can be altered locally in order to determine theoutcome or request a second node having a node order that is equal to orhigher than that of the first node to help determine the outcome usingthe rules and meta-rules associated with the second node.

If the second node is unable to determine the outcome using itsassociated rules, the second node uses its associated meta-rules toeither determine whether one or more of its associated rules can bealtered locally in order to determine the outcome or request a thirdnode having a node order that is equal to or higher than that of thesecond node to help determine the outcome using the rules and meta-rulesassociated with the third node.

Moreover, the first node uses historical transaction information toupdate the rules and meta-rules associated with a node having a nodeorder that is equal to or lower than that of the first node in order torender processing of transactions more efficient.

Each node is configured to receive an administrative request. Upon anode receiving the administrative request, the node is directed topropagate one or more of its associated plurality of rules or meta-rulesto another node.

Each node is also configured to collect data relating to thetransactions to allow a system provide to manage or maintain systemperformance.

In another exemplary embodiment, another system for providingdistributed control to process transactions is provided. The systemincludes a number of service provider systems, each service providersystem having associated therewith a number of rules and a number ofmeta-rules; a number of point of service devices, each point of servicedevice having associated therewith a number of rules and a number ofmeta-rules; and a number of portable devices, each portable devicehaving associated therewith a number of rules and a number ofmeta-rules.

A portable device uses its associated rules to determine an outcome fora transaction. If the portable device is unable to determine the outcomefor the transaction using its associated rules, the portable device thenuses its associated meta-rules to either determine whether one or moreof its associated rules can be altered locally in order to determine theoutcome or request a point of service device to help determine theoutcome using the rules and meta-rules associated with the point ofservice device. Alternatively, the portable device and the point ofservice device may use their respective associated rules to determinethe outcome for the transaction. If the outcome cannot be reached, thepoint of service device uses its associated meta-rules to eitherdetermine whether one or more of the rules associated with either theportable device or the point of service device can be altered locally todetermine the outcome or request another point of service device.

If the point of service device is unable to determine the outcome usingits associated rules, the point of service device uses its associatedmeta-rules to either determine whether one or more of its associatedrules can be altered locally in order to determine the outcome orrequest another point of service device or a service provider system tohelp determine the outcome using the rules and meta-rules associatedrespectively with this other point of service device and the serviceprovider system.

Optionally, the system further includes a number of network gateways,each network gateway having associated therewith a number of rules and anumber of meta-rules. If the point of service device is unable todetermine the outcome using its associated rules, the point of servicedevice uses its associated meta-rules to either determine whether one ormore of its associated rules can be altered locally in order todetermine the outcome or request another point of service device or anetwork gateway to help determine the outcome using the rules andmeta-rules associated respectively with the point of service device andthe network gateway.

If the network gateway is unable to determine the outcome using itsassociated rules, the network gateway uses its associated meta-rules toeither determine whether one or more of its associated rules can bealtered locally in order to determine the outcome or request anothernetwork gateway or a service provider system to help determine theoutcome using the rules and meta-rules associated respectively with thisother network gateway and the service provider system.

Moreover, the point of service device uses historical transactioninformation to update the rules and meta-rules associated respectivelywith one or more portable devices in order to render processing oftransactions more efficient. Similarly, the service provider system useshistorical transaction information to update the rules and meta-rulesassociated respectively with one or more point of service devices andone or more portable devices, and one or more network gateways in orderto render processing of transactions more efficient.

In yet another exemplary embodiment, a method for providing distributedcontrol to process transactions is provided. The method includes:maintaining a service provider system having associated therewith anumber of rules and a number of meta-rules; maintaining a point ofservice device having associated therewith a number of rules and anumber of meta-rules; maintaining a portable device having associatedtherewith a number of rules and a number of meta-rules; determining anoutcome for a transaction using the rules associated with the portabledevice; and if the outcome cannot be determined using the rulesassociated with the portable device, using the meta-rules associatedwith the portable device to either determine whether one or more of therules associated with the portable device can be altered locally inorder to determine the outcome or request the point of service device tohelp determine the outcome using the rules and meta-rules associatedwith the point of service device.

The method also comprises: if the outcome cannot be determined using therules associated with the point of service device, using the meta-rulesassociated with the point of service device to either determine whetherone or more of the rules associated with the point of service device canbe altered locally in order to determine the outcome or request theservice provider system to help determine the outcome using the rulesand meta-rules associated with the service provider system.

The method further comprises: maintaining a network gateway havingassociated therewith a number of rules and a number of meta-rules; andif the outcome cannot be determined using the rules associated with thepoint of service device, using the meta-rules associated with the pointof service device to either determine whether one or more of the rulesassociated with the point of service device can be altered locally inorder to determine the outcome or request the network gateway to helpdetermine the outcome using the rules and meta-rules associated with thenetwork gateway.

Moreover, the method comprises: if the outcome cannot be determinedusing the rules associated with the network gateway, using themeta-rules associated with the network gateway to either determinewhether one or more of the rules associated with the network gateway canbe altered locally in order to determine the outcome or request theservice provider system to help determine the outcome using the rulesand meta-rules associated with the service provider system; directingthe point of service device to use historical transaction information toupdate the rules and meta-rules associated with the portable device inorder to render processing of transactions more efficient; and directingthe service provider system to use historical transaction information toupdate the rules and meta-rules associated respectively with theportable device and the point of service device in order to renderprocessing of transactions more efficient.

Reference to the remaining portions of the specification, including thedrawings and claims, will realize other features and advantages of thepresent invention. Further features and advantages of the presentinvention, as well as the structure and operation of various embodimentsof the present invention, are described in detail below with respect toaccompanying drawings, like reference numbers indicate identical orfunctionally similar elements.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a simplified schematic diagram illustrating the systemarchitecture of one exemplary embodiment of the present invention;

FIG. 2 is a simplified schematic diagram illustrating an exemplaryembodiment of a software service agent according to the presentinvention;

FIG. 3 is a simplified schematic diagram illustrating an exemplaryembodiment of the meta-rules formalism according to the presentinvention;

FIG. 4 is a simplified diagram illustrating various distributed adaptiveloyalty schemes that can be implemented according to the presentinvention;

FIG. 5 is a simplified diagram illustrating the concept of equivalentoffers using vector theory according to one exemplary embodiment of thepresent invention; and

FIG. 6 is a simplified diagram illustrating an offer feedback loopaccording to one exemplary embodiment of the present invention.

DETAILED DESCRIPTION OF THE INVENTION

The present invention in the form of one or more exemplary embodimentswill now be described. As used herein, the following is a glossary ofterms with their corresponding definitions:

Portable device: a personal device, with storage and computing abilityand sets of unique identifying characteristics, carried by an individualand used to conduct a transaction.

Point of service (sale) device: a device, with storage and computingability, used to interact with the portable device and, from time totime, with network gateways and/or back-end systems, to conduct atransaction at the point of service or sale.

Back-end system (service provider system): a computing device, separatefrom the point of service device, that enables the delivery of aservice, provides data and software objects required locally for thedelivery of the service, and analyzes data about serviceevents/transactions and the point of service state.

Network switch (network gateway): a computing device that enablescommunications between the point of service devices and the back-endsystems and may perform data/transaction processing on behalf of theback-end systems if so configured.

System component (node): a component of the transactionalinfrastructure; portable devices, point of service devices, networkgateways, and back-end systems are the different types of nodes of thesystem.

Node order: level of authority of a node in the transactionalinfrastructure; generally, the portable devices have the lowest nodeorder, followed by the point of service devices, the network gatewaysand the back-end systems in ascending order.

Portable device user: a carrier of the portable device at the time ofthe transaction with the point of service device.

Portable device issuer: an owner and/or provider of the portable device.

Point of service device operator (acceptor): an entity or personresponsible for the operations of the point of service device.

Service provider: a provider of services the delivery of which isenabled by the interaction of the portable device and the point ofservice device; examples of a service provider include financialinstitutions providing payment services, merchants providing promotionalprograms, and product manufacturers.

Network owner (processor): an owner of a network gateway providingconnectivity, switching between point of service devices and back-endsystems, and optionally, performing transactional processing on behalfof the service providers.

Transaction: a singular interaction between the portable device and thepoint of service device including a decision related to servicedelivery; the result of the transaction may be successful, unsuccessful,or in a number of intermediate states as defined by the serviceprovider.

Service request: a call from a system node to a node of a similar (peerto peer) or higher node order to assist in the processing of atransaction based on the rules and meta-rules available at that node.

Administrative request: a call from a system node to a node of a similar(peer to peer) or lower node order to assist in the processing,distribution and management of system data, system states, anddistribution of processing rules and meta-rules.

System state: a compilation of states of all components of thetransaction system at a given time, including node state, local data,event data and system records; the system state may vary with time.

System performance: average over a period of time of the system statescompared to an optimum state.

Service delivery record: a record of past transaction results.

Price computation rules (transaction processing rules): local set ofprocessing rules defining the conditions under which a transaction willbe priced locally or referred to a node of a higher order.

Meta-rules: rules governing (1) the definition of equivalence, orsubstitution between one price computation rule and another; rules aresaid to be equivalent when their application would result in the sametheoretical system performance; rule substitution is the operation bywhich a node replaces a price computation rule with another to increasethe probability of achieving a desired system performance; (2) theadministration of the modes, such as viral distribution, of the systemmanagement function to service requests like, update of rules andmeta-rules and initialization response to the administration request.

Viral distribution (viral transmission): mode of rules propagation notinvolving a back-end system; propagation occurs when one node providesits rules and meta-rules to another node of equal or lesser order forthe purpose of incorporation into the recipient node's sets of rules andmeta-rules.

According to one exemplary embodiment, a system is provided for themanagement and distribution of rules used to determine the allowed priceof a product or service to be provided during a transaction. In oneaspect, components of the system (nodes), including the back-endsystems, the network gateways, the point of service devices, and theportable devices are able to locally utilize corresponding algorithmsand/or rules to collectively determine the outcome of a transaction or aservice delivery request (transaction processing rule). In oneconfiguration, a service provider initially defines the algorithmsand/or rules for all the system nodes that are to be used to process atransaction related to that service provider and may modify suchalgorithms and/or rules from time to time. As will be further describedbelow, the components are able to adapt these algorithms and/or rules.

In one situation, the universe of possible price computation rules usedto determine the price of a product or service is defined by the serviceprovider with the intention of achieving an optimum system performance.The price computation rules may use utilize a variety of data todetermine the outcome of the transaction including, for example,environmental data, node data, event (transaction) data includingtransaction value setting data (such as, price, grades, risk, etc.),system data (such as, node identifier, owner, security classes, schemeparticipation, etc.), system state data, system components states data,service delivery records, user and service provider data and logs (suchas, behavioral data, demographics data, psychographics data, etc.),service logs, observed and desired system performance.

Price computation can be performed in a number of ways. For example, aprice computation may be completed at the local node; alternatively, inthe case of inconclusive processing at the local node, the pricecomputation can be re-processed either with referral to the localmeta-rules for alteration of the local price computation rules or viareferral with a service request to a node of a higher order forprocessing based on the price computation rules and meta-rules stored atthat node. Collaborative price computation is performed when a nodeengages one or more other nodes to participate in the processing of thetransaction and/or the adaptation of the rules.

When nodes communicate and propagate to other participating nodes pricecomputation rules and meta-rules, such viral distribution ortransmission of rules and meta-rules are defined by the service provideras part of the system's meta-rules. Furthermore, each node cancommunicate to other nodes its level of participation in response toservice requests. The participation level of each node in the system isdefined and controlled as part of the meta-rules of the system.

The adaptation of price computation rules is based on rules ofequivalence (meta-rules) allowing the substitution of sets of data andassociated algorithms between nodes. Such rules of equivalence allow theprobability of enhancing system performance to be maximized according tothe definition provided by the service provider. The rules ofequivalence (meta-rules) are typically defined by the service providerto seek optimization of system performance according to the serviceprovider's business objectives and/or economic model.

The adaptation of price computation rules may happen on a real-timebasis as part of the processing of a transaction; or from time to time,using a local node heuristic engine capable of analyzing the node state,node service logs, and available system state data, and based on thelocal meta-rules; or by receipt of administrative requests.

The meta-rules, or rules of equivalence, are based on the computationand comparison of expected, desired and measured system performance forvarious price computation rules and the definitions of conditionsallowing for the substitution of one set of price computation rules andassociated data for another.

The meta-rules are distributed as node to node transactions defined asadministrative requests. Response to each administrative request isperformed according to pre-existing meta-rules.

The price computation rules and meta-rules are embodied in softwareagents in each participating node, provided or certified or otherwiserecognized by the service provider. The system supports conjointdelivery of services by different service providers. A software agentfrom one participating service provider may engage a software agent froma different service provider, sharing the same node, to affect the pricecomputation for the delivery of either service or product.

System Nodes

FIG. 1 is a simplified schematic diagram illustrating the systemarchitecture of one exemplary embodiment of the present invention.Referring to FIG. 1, the system 100 includes a hierarchy of nodesincluding a number of portable devices 102, a number of point of servicedevices 104, a number of network gateways 106 and a number of back-endsystems 108. In an alternative embodiment, the system 100 may include anumber of portable devices 102, a number of point of service devices 104and one back-end system 108.

In an exemplary embodiment, each node includes the following components:one or more service software agents, one or more modules for providinglocal data system services (such as, data acquisition and storage), oneor more base communication modules for node to node communications, anda unique identifier permanently or dynamically assigned foridentification within the system 100.

In an exemplary embodiment as shown in FIG. 2, the service softwareagent includes a price computation engine, a price computation rulesstore, a meta-rules store, a heuristic engine for meta-rules processingand a communications module configured to interface with the node's basecommunication modules and/or other locally residing software serviceagent.

Portable Device Node Characteristics

A node that is a portable device 102 includes the followingcharacteristics. Such node is optionally capable of interacting with auser through a number of devices or system including, for example, adisplay, a print-out system, a system capable of utilizing the sense ofsight, a speaker or microphone, a system capable of utilizing the senseof hearing, a vibrating system, a keypad or a system capable ofutilizing the sense of touch. Examples of portable devices 102 include,smart cards, personal digital assistants (PDAs), cellular phones,pagers, memory sticks, dongles and the like.

Point of Service Device Node Characteristics

A node that is a point of service device 104 includes the followingcharacteristics. Such node is capable of communicating with the portabledevices 102 via a number of means including, for example, radiofrequency, infra-red, direct electrical means and the like. Such node isalso capable of interacting with a user or point of service deviceoperator through a number of devices or systems including, for example,a display, a print-out system, a system capable of utilizing the senseof sight, a speaker or microphone, a system capable of utilizing thesense of hearing, a vibrating system, a keypad and a system capable ofutilizing with the sense of touch. Such node is further capable ofcommunicating in a substantially real-time basis with a back-end system108 directly or through a network switch/gateway 106.

The point of service device 104 includes software enabling and allowingthe delivery of various types of services including, for example, securestorage of information such as unique device identification information,transaction event information, environmental information and systemperformance parameters. The point of service device 104 is also capableof measuring certain environmental information such as time,temperature, weather, geographical location. Examples of a point ofservice device 104 include a personal computer, point of sales device,kiosk, ATM, cellular phone, regular phone and the like.

Network Switch/Gateway Node Characteristics

A node that is a network gateway 106 has the following characteristics.Such node includes software and/or control logic to route servicerequests and administrative requests based on node identifiers. Suchnode is capable of communicating with point of service devices 106 andthe back-end systems 108 on a substantially real time basis. Such nodeis further capable of providing peer-to-peer communications with othernetwork switches 106. Communications with the point of service devices104, the back-end systems 108 and other network gateways 106 areconducted in a secure manner. Examples of network gateways 106 includetransaction stored and forward systems, payment network switches,payment network intercept or stand-in processing systems and the like.

Back-End System Node Characteristics

A node that is a back-end system 108 has the following characteristics:it is capable of communicating with point of service devices 106 on asubstantially real time basis either directly or through theintermediary of a set of network switches 106. Such node includessoftware and/or control logic capable of managing price computationrules and meta-rules throughout the system 100. Such node includessoftware and/or control logic capable of collecting a variety of dataincluding, for example, system state data and services logs, transaction(event) data. The node uses the collected data to perform a number offunctions including, for example, reporting functions for the purpose ofbilling, identifying, managing and counteracting fraud occurring in thesystem 100 and allowing the system operator to monitor and achievebetter system performance, and supporting customer service functions inparticular dispute resolution and exception handling. Communications toand from the node may be provided in a secure manner.

Transaction Processing and Service Requests

A portable device 102 typically initiates a transaction by issuing atransaction request to a point of service device 104. Alternatively, thepoint of service device 104 may initiate a transaction on its own. Whenthe point of service device 104 initiates a transaction or receives atransaction request for a transaction to be initiated, the softwareservice agent within the point of service device 104 collects from thepoint of service device 104 and the portable device 102 such informationas is necessary to determine the price for the goods and/or services tobe provided during the transaction, computes the price for thetransaction using the collected information and completes thetransaction according to rules governing the transaction.

The point of service device 104 may have to “negotiate” with theportable device 102 to access such information as it requires, forinstance, performing the necessary mutual authentication to ensure thesecurity and integrity of the information exchanged. Such negotiationutilizes the price computation engine residing on the portable device102. Thus, information used in the context of the transaction may beacquired, read from storage and/or computed by both devices. Examples ofsuch types of information include time of day and temperatureinformation which is acquired during the transaction, deviceidentification and user information which is read from storage andtransaction information including, for example, transaction number andtransaction cryptogram, which is computed during the transaction.

In the event that the local price computation rules do not permit thepoint of service device 104 to arrive at a satisfactory outcome (i.e., adefinitive decision between multiple processing options cannot bereached), the point of service device 104 may attempt to process thetransaction by (1) substituting price computation rules per the localmeta-rules book or (2) sending a service request to a higher order nodewhich may be a network switch 106 or back-end system 108, ifcommunication with such higher order node is possible. Such servicerequest is then processed by the receiving node as if it was atransaction request to be processed locally according to the transactionprocessing rules and/or and the local price computation rules in placeat that node. In the event that the receiving node is similarly unableto arrive at a satisfactory outcome, then the receiving node may attemptto process the transaction according to its meta-rules book or refer thetransaction to a node of equal or higher order if possible.

System Management

A service provider is responsible for initializing the various systemnodes in order to deliver services offered by such service provider.Such initialization may occur via a connection to the service provider'sback end system or via injection locally on the individual nodes priorto their connection to the system 100. The service provider also definesthe set of meta-rules to be used in the system 100. Such rules aredefined for each participating nodes and include such definitions asrules of equivalence and rules of communications.

Rules of equivalence or meta-rules are rules that govern substitution ofa price computation rule with another. Such substitution could formallybe described as the definition of a local algebra across the n-space ofapplicable price computation rules as follow: If Σ_(n) is defined as then-space representing all possible system states, including system leveldata and node local data (acquired or computed), a price computationrule or operator can be defined as a numerical function

on Σ_(n). System Performance is then defined as a numerical function

defining a topology for Θ_(k), the universe of possible pricecomputation functions for the system. A meta-rule is then defined as atransfer function

from Θ_(k) into Θ_(k) with the following construction rule:

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) FIG. 3 is a simplified schematic diagram illustrating an exemplaryembodiment of the meta-rules formalism according to the presentinvention.

Rules of communication dictate the instances and/or conditions underwhich service requests and administrative requests are performed.Requirements related to system overall security and integrity areincluded within such rules. This in particular includes the methods bywhich service and administrative requests are routed to the appropriatenode and the process by which meta-rules are updated during anadministrative request.

The service provider is responsible for the installation and/ordistribution of the meta-rules to participating nodes. Initialization ofsystem nodes includes the basic rules whereby meta-rules are receivedand locally updated. Subsequently, distribution of meta-rules books tosystem nodes can take several forms including, for example, injection inthe node prior to its connection to the system, communication to thenode specifically for receiving meta-rules book updates, and viralpropagation from node to node of lower or equal order.

Once a system is operational, price computation rules book evolveslocally per the conditions measured at that particular node as to theperformance of the system. To ensure system integrity as well as providethe ability for the service provider to continuously upgrade the set ofmeta-rules, the system nodes from time to time may be required toprovide different types of information to the back-end system including,for example, a copy of the then current local price computation rulesbook, a copy of the local price computation logs, and other local nodestate data. Such exchange of information is performed in response to anadministrative request from the back-end system to nodes of lower order,which request may also include at that time data to update locally thetransaction or price computation rules book, the meta-rules book andother system data such as identifiers, keys, etc.

Practical Examples

The following is a number of practical examples further illustrating thepresent invention as described above.

Distributed Loyalty System

Instead of a basic storage area in the portable and base device as isthe case today, in one exemplary embodiment, the present inventionprovides the token with a heuristic function of modeling reward programswithin an economic surface area. Such a surface area is delimited bythree (3) or more equations, each equation representing a consumerbehavior model that a sponsor develops to maximize revenue based oneconomic formulas encompassing consumer past behavior, productgeneration cost and profitability.

In one exemplary embodiment, the present invention is used to implementvarious distributed adaptive loyalty schemes as shown in FIG. 4. Thetraditional purchase transaction can be described as stimulus. Therewards, coupons, discounts, passes, are a loyalty system's responses.The new system's stimulus/response mechanism provides portable and basedevices with portable rules engine (distributed) having the ability tofunction in real-time to create closed-loop, modular system forrepeatedly accepting stimulus and providing adaptive responses.

Adaptive responses are offered at the point of service. According to oneexemplary aspect, each transaction is analyzed and a user's individualprofile is updated. The profile determines the appropriate scheme rulesand thresholds to utilize.

The result of the data mining functions then generates such equations,which could be updated on a regular basis. Instead of downloadingparameter files, the back-end system rules engine downloads the newequations and their coordinates ((x1, y1), (x2, y2), etc). Each andevery equation is an economic model that encapsulates a minimum andmaximum value for a given set of products, e.g., dairy products likecheese, milk, yogurt, with specific reward functions, get one free, 18%off etc. Generically speaking, an algebra for every space is generated,the intersection of spaces constitutes the economic reward that isprovided to the consumer.

If the consumer does not buy within the proposed multidimensional area(as shown in FIG. 4 (it is a 2-space system because of the difficulty ofrepresenting an n-space system), it requires the portable device requesta change in parameters and translates into a change of slope of thelinear programming equation changing elements in some of the spaces.With the present invention, the stimulus is not just limited to purchasetransactions but includes transactions initiated from other use of theportable device, for example, balance/status queries (no purchases) andaccess device. In addition, more dimensions of stimuli can be capturedand analyzed at the point of sale thus allowing the system to deploymore effective responses. For example, traditional stimuli capturetransactional data, i.e., whether purchase was made or not. According toone exemplary embodiment, with a distributed adaptive system, stimulusdata can encompass spatial (where), historical (purchase history) andtemporal (when) dimensions.

Vending Machines with Adaptive Pricing

Vending machines are generally off-line devices that are designed todeliver goods for a set price. The price may be adapted according toeach device but is generally done arbitrarily. Yet many instances wouldexist to optimize the performance of a given device. The performance ofa device could be defined as the maximization of profit marginsgenerated by the device, the maximization of sales per device and theoptimization of service calls for the device.

Each of these performance criteria can become the foundation for a setof price setting rules used to fluctuate the price of the goodsdelivered according to the environment. For instance, soda machinesmight increase their price when the ambient temperature increases due tothe expected increase in demand. Through the use of a local heuristicengine, the elasticity of demand vs. price and temperature can beplotted and extrapolated and therefore prices may be constantlyadjusted. Such a method may be used to either maximize profit or tomaximize sales, to ensure that most of the demand for the beverages iscaptured. Other parameters that might easily influence the price of thegoods could include the time of day and day of the week, effectivelytaking into account the sensitivity of demand according to theseparameters.

One issue with vending machines is the need to adequately replenishthem. In the event of available communications link, a machine might“call for service”. Alternatively the machine may use inventory controland pricing methods to maximize the number of sales in between scheduledservice visits, thus reducing the overall cost of servicing the machineand optimizing the sales per unit. Through this example, it can be seenthat price can thus be set according to a set of computation rules (inthis instance, the price as a function of the goods selected) andmeta-rules, comparing the measured vs. desired performance of the system(profit, sales, service calls, etc.) and the measured sensitivity tovarious local parameters (temperature, time, time to next visit . . . )to adapt locally the price of the goods delivered, without requiring acentral intervention. Furthermore, service logs (in this case theevolution of sales vs. price as a function of the other registeredparameters) may be used by the goods distributors to develop moreefficient meta-rules where multiple parameters and rules may be used toevolve product pricing.

Adaptive Targeted Offering

Adaptive targeted offering allows the intelligence distribution withinthe system. Hence, the rules can be locally updated by the portabledevice, the point of service device or the network gateway with certainpredetermined and defined parameters to provide equivalent offers. Thisis a powerful tool to allow a very flexible adaptation to the givenenvironment and the buying habits of the portable device user. Theoffers can be modified to motivate the portable device users to tryoffers they would not otherwise have tried without the help of theincentives. The intelligence in the systems allows a certain level ofneural learning within the system enhanced by the feedback loop createdby the adaptation of the offers and the measurement of the response.

The concept of equivalent offers can be easily explained using vectortheory as shown in FIG. 5 where the offer depicted by vector AD isequivalent to the two step offer depicted by vectors AB and BD as wellas vectors AC and CD. FIG. 6 illustrates a feedback loop which providesthe means to adjust the offers based on the previous execution andprovides the necessary means to stabilize the purchasing behavior.

Benefits of the present invention relate to its ability to increase thevalue derived from a transactional system without incurring significantnetworking costs. In fact, given the presence of heuristic components inevery system node to potentially adapt price computation as a functionof system performance, the role of back-end systems becomes more one ofmonitoring system states and performance and propagating updates to themeta-rules book to continuously enhance the overall system performance.

The present invention is applicable to a number of systems related topayment applications. Furthermore, the present invention is described interms that allows it to cover the breadth of emerging forms of paymenttokens including application that would include heuristics for pricecomputation, or provide for distributed management of price computationsystems.

The present invention could be expanded beyond the notion of dynamicpricing to other decisions that might be performed at the point and timeof service. Thus, this invention may be expanded further into fieldsthat involve decision making with a consumer token. It is, for instance,possible to envision such an approach being used in areas such astraveler security. Equally, the present invention could play a role inthe emerging contactless applications.

It should be understood that the present invention as described abovecan be implemented in the form of control logic using computer softwarein a modular or integrated manner. Based on the disclosure and teachingsprovided herein, a person of ordinary skill in the art will know andappreciate other ways and/or methods to implement the present inventionusing hardware and a combination of hardware and software.

It is understood that the examples and embodiments described herein arefor illustrative purposes only and that various modifications or changesin light thereof will be suggested to persons skilled in the art and areto be included within the spirit and purview of this application andscope of the appended claims. All publications, patents, and patentapplications cited herein are hereby incorporated by reference for allpurposes in their entirety.

1.-57. (canceled)
 58. A method comprising: initiating a transaction, bya portable device having a plurality of rules and a plurality ofmeta-rules, wherein the portable device communicates with a point ofservice device having a plurality of rules and a plurality ofmeta-rules; and using at least some of the plurality of rules and theplurality of meta-rules in the portable device to determine an outcomefor the transaction; and wherein when the portable device and the pointof service device are unable to determine an outcome for thetransaction, the point of service device uses its plurality ofmeta-rules to either determine whether one or more of the plurality ofrules in either the portable device or the point of service device canbe altered locally in order to determine the outcome, or request anetwork gateway or a service provider system to help determine theoutcome using the plurality of rules and the plurality of meta-rules inthe network gateway or the service provider system.
 59. The method ofclaim 58, wherein the transaction is initiated by issuing a transactionrequest from the portable device to the point of service device.
 60. Theportable device of claim 58 wherein the portable device is a paymentcard.
 61. The portable device of claim 58, wherein the portable deviceis a phone.
 62. The method of claim 58 wherein the point of servicedevice communicates with the portable device using radio frequencycommunication.
 63. The method of claim 58 wherein the portable deviceand the point of sale device mutual authenticate each other during thetransaction.
 64. The method of claim 58, wherein the point of servicedevice receives an administrative request from the service providersystem, wherein the administrative request includes an update to theplurality of rules and an update to the plurality of meta-rulesassociated with the point of service device, and a time to perform theupdate.
 65. The method of claim 58, wherein the point of service deviceuses historical transaction information to locally alter the pluralityof rules and plurality of meta-rules associated with the point ofservice device.
 66. The method of claim 58, wherein the point of servicedevice measures environmental information, including time, temperature,weather, or geographical location.
 67. The method of claim 66, whereinthe point of service device uses the environmental information to updatethe plurality of rules and plurality of meta-rules associated with thepoint of service device.
 68. A portable device, comprising: a processor;and a non-transitory computer readable medium comprising code executableby the processor to implement a method associated with the portabledevice and a point of service device, the method comprising: initiatinga transaction, by the portable device having a plurality of rules and aplurality of meta-rules, wherein the portable device communicates withthe point of service device having a plurality of rules and a pluralityof meta-rules; and using at least some of the plurality of rules and theplurality of meta-rules in the portable device to determine an outcomefor the transaction; and wherein when the portable device and the pointof service device are unable to determine an outcome for thetransaction, the point of service device uses its plurality ofmeta-rules to either determine whether one or more of the plurality ofrules in either the portable device or the point of service device canbe altered locally in order to determine the outcome, or request anetwork gateway or a service provider system to help determine theoutcome using the plurality of rules and the plurality of meta-rules inthe network gateway or the service provider system.
 69. The portabledevice of claim 68, wherein in the method, the transaction is initiatedby issuing a transaction request from the portable device to the pointof service device.
 70. The portable device of claim 68 wherein theportable device is a card.
 71. The portable device of claim 68, whereinthe portable device is a phone.
 72. The portable device of claim 68,wherein the portable device is configured to communicate with the pointof service using radio frequency communication.
 73. The portable deviceof claim 68, wherein the portable device is configured to mutuallyauthenticate with the point of service terminal.